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Will standards tighten carbon trading rules?

Whatever program or term is favored — carbon sequestration, offset credits, cap-and-trade — there remains a glaring problem with the practice of polluting companies buying greenhouse gas reduction credits from farmers and landowners.

That difficulty is in ensuring the end result is verifiable and legitimate.

In an attempt to provide that legitimacy, or at least prod the infant industry towards more measurable standards, Duke University Press is set to release a “how-to manual” for growers and landowners. Titled Harnessing Farms and Forests in the Low-Carbon Economy: How to Create and Verify Greenhouse Gas Offsets, the book is due in June and was developed by Duke’s Nicholas Institute for Environmental Policy Solutions.

“Today’s carbon market is like the Wild West — anything goes in terms of measurement and verification standards,” said Dick Wittman, during a May 17 press conference highlighting the book.

An Idaho farmer, Agricultural Carbon Market Working Group member and former president of the Pacific Northwest Direct Seed Association, Wittman said “it will be a challenge for greenhouse gas reductions from agriculture to get the credit they deserve. There is a ‘buyer beware atmosphere’ out there that makes it difficult to distinguish really good agriculture projects that reduce significant greenhouse gases from those that don’t. Businesses won’t have confidence their emissions are being offset until there is a standard measurement and verification protocol.”

Editors of the book promise it will explain how to maximize land’s carbon dioxide storage capacity and reduce emissions of methane and nitrous oxide. Doing so generates “offsets” that can then be traded in future carbon markets.

As global warming and the Kyoto protocols are argued over and solutions sought, lawmakers are intrigued by the potential of offsets. And why shouldn’t they be? Theoretically, using such a system would mean corporate polluters could keep the environmental scales balanced while pumping badly needed funds into rural America.

"This is a comprehensive roadmap that paves the way for agriculture as a verifiable, measurable carbon sink," said Wittman. "Recent studies … have indicated that carbon could be an $8 billion market for agriculture. This document proves that specific agricultural conservation-tillage practices are a legitimate method to store carbon. Should policymakers embark on a cap-and-trade policy on climate, agriculture has the potential to be a cost effective solution for those who are trying to curtail carbon and other greenhouse gas emissions."

A number of bills have been introduced in the U.S. Congress dealing with carbon sequestration and trading, “and we expect that sometime in the next year or two there will be legislation,” said Tim Profeta, director of the Nicholas Institute. “Yet many people, from the Midwest to Washington to Wall Street, have recognized that bringing farmers and foresters to the table requires a system that accurately measures and accounts for their greenhouse gas reductions.

Farmers and foresters need information on exactly what practices will bring what types of reductions — exactly how much they are reducing and what those reductions are worth. Industrial purchasers, and their investors, need to be sure the reductions are real.”

Although Congress has yet to act, voluntary trading of offsets has begun through local markets, brokerages and trading clubs. The Chicago Climate Exchange (CCX) is also spearheading such trades.

Unfortunately, standards used to define the emissions reductions and offsets being traded, “have varied wildly,” said Zach Willey, economist for Environmental Defense and co-editor of the new book. “Until now, we have not had a uniform and credible definition of greenhouse gas emission offsets being marketed and traded in the United States.”

The book proposes a set of criteria for the fledgling offset industry: the “Duke standard.”

This standard should provide “farmers and foresters with comprehensive, user-friendly descriptions of how to change their land use practices to reduce atmospheric emissions. It also provides the principles and methods needed to verify those emissions savings are real.”

Willey said there is a need to “strike a balance between reliability and affordability. That is, farmers and foresters, regulators, and the public must be able to trust that the offsets landowners create are real, but the costs of measuring and verifying the offsets must not rise so high that projects become economically impractical.”

Divided into three sections, the book first provides an overview for those unfamiliar with offset markets. According to Willey, the second section — aimed at landowners, investors and purchasers — provides “a more detailed but non-technical exposition” of the offset process. The third section provides specific technical information “critical to the individuals responsible for quantifying, verifying, and/or regulating offsets.”

• Sequestering carbon in soils, such as through the adoption of no-till farming.

• Sequestering carbon in biomass through cultivation of new forests and grasslands or delays in harvesting forests.

• Reducing methane emissions through changes in the practices used to process and dispose of manure.

• Reducing emissions of methane and nitrous oxide through changes in farming practices.

What about current contracts and rates?

“We engaged in a carbon lease contract with the Entergy Corporation out of Louisiana,” said Wittman.

“We abrogated about 75,000 tons of CO2. This was done in the very early stages of carbon trading. And we did it more as a project to help educate our producers — direct seed growers.”

At the time, “the science indicated we were sequestering in the neighborhood of two-thirds to one ton of carbon per acre, per year. Because it’s a lease, the values on that contract are hard to extrapolate compared to a direct sale. It was a 10-year contract.”

How does the “Duke standard” differ from the registry and verification put in place by the Chicago Climate Exchange? Why not just use the CCX standard?

“Basically, the Duke standard is what we’d call ‘additive,’” said Willey. “It creates tighter standards than presently exist in the United States, including with the CCX. It increases the credibility of the offsets so they’re accepted into a national market. The CCX had a great beginning. But they need to tighten standards up so they’ll be accepted widely in the U.S. market.”

However, such a cap-and-trade system isn’t even allowed in the Kyoto protocol. How will the “Duke standard” overcome that?

“A slight correction on the Kyoto protocol: ‘(such systems) aren’t allowed yet’ is a more accurate statement. But during the (protocol’s) second phase, which begins in 2008, there will be consideration of allowing agricultural offsets and the so-called ‘clean development mechanism’ where, in developing countries, they’re allowed. The protocols are just beginning development.

Still, Willey admitted there has been “a political problem in allowing land sector, forest and agriculture offsets into a greenhouse gas market. It was a problem when the Kyoto protocol was enacted and it’s been a problem in this country. The key thing the Duke standard does is address many concerns of critics that these offsets aren’t real and therefore shouldn’t be allowed into a national market. The Duke standard takes us a long way towards answering those questions.”

When Wittman did his first carbon sequestration contract, the verification process “was pretty much limited to on-the-ground inspections to ensure people were continuing the direct seed practices that science said would sequester carbon.”

In the future, as offsets are prepared for international eligibility, “we’ll have to tighten up the measurement processes to determine more accurately how much we’re sequestering and under what farming practices (work best to) sequester carbon. The Duke standard is providing a great overview process in which some of the science and research can come together and get more definitive results in testing models.”

What practices is Wittman using?

The main practices that sequester carbon are “those that minimize, or eliminate, intensive tillage — things like direct-seeding/no-till, strip-till… Over the last 300 years, the U.S. has lost almost half the organic material in our tilled soils. By reversing our management practices and stopping tillage, we’re showing we can increase the amount of carbon stored.”

Wittman has been intermittently direct-seeding his operation for over 20 years. But, on a continuous basis, he hasn’t tilled for over 10 years.

“The soil quality increase is incredible. And soil quality is directly synonymous with the amount of carbon stored in it… If we could convert a major portion of the world’s producers to this method of operation there are estimates that anywhere from a fifth to a quarter of the total reduction targets could be accomplished.”

How does the Duke standard address natural hazards sure to hit farmland and forests? How might such things affect contracts?

“When you have natural hazards involved in any kind of land management practice, the question of who bears the risk of those kinds of releases must be addressed (in the purchase contract). One of the classic examples is what happens in a direct-seeding situation if the project doesn’t deliver or there is somehow some tillage? (Wittman built in) extra acreage to provide self-insurance (in case of a bad) outcome.”

In the case of a forest release, “a contract will have to address whether the forest landowner will pay the money back… or if there are other ways to self-insure. In the United States, I assume, eventually there will be insurance instruments available for these contracts to protect against a (bad) outcome.

“It’s an issue that needs to be addressed. And when regulations and legislation are promulgated it will have to be addressed. There will need to be insurance mechanisms associated with these exchanges.”